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Store Characteristics in Retail Oligopoly

Howard Smith
The RAND Journal of Economics
Vol. 37, No. 2 (Summer, 2006), pp. 416-430
Published by: Wiley on behalf of RAND Corporation
Stable URL: http://www.jstor.org/stable/25046249
Page Count: 15
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Store Characteristics in Retail Oligopoly
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Abstract

I use of consumer choice model for the British supermarket industry to compare the incentives of firms, selecting store characteristics, with the interests of consumers. I perform a series of counterfactual changes to store size and location and rank the alternatives by gains per unit of fixed cost. Jointly, firms gain most from large stores, which increase total consumer expenditure. Individually, however, firm incentives are strongly influenced by business-stealing effects, resulting in a close agreement with consumers, who value middle-sized stores and distance-reducing relocations. These individual firm incentives provide little consumer-protection justification for recent size and location regulations.

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